Better Call the Waaaahmulance!

Over the past several weeks we've penned many posts about manufacturers that have woken up to the hidden costs of offshore manufacturing or outsourcing and have decided to return to America. By focusing on improving internal efficiencies and recognizing the extra tangible and intangible costs of global supply chains, cash floating on the high seas, communication problems, and long problem recognition and resolution chains they realize they can offset the supposedly "lower cost" of China and elsewhere. But just when we begin to get a warmer feeling in our heart we get jolted back to the reality that many, if not most, manufacturers just don't get it.

If you can't beat China and can't get the U.S. government to understand what you're up against, then you may as well join them. That is what Evergreen Solar has decided to do, shifting
production of solar fabrication and assembly from its factory in
Devens, Mass., to Wuhan, China. Evergreen Solar CEO Rick Feldt went to Washington, D.C., and
met with Energy Secretary Steven Chu and Commerce Secretary Gary Locke.
He told them Chinese government policies made U.S. production
uncompetitive.

Without an adequate response from the U.S. government to counter
competitive forces working against domestic production, "we are going
to China as quickly as we can," Feldt told the analysts. "The issue for
us is just how long does it take to get there. We've got the China
operations underway as we speak." The company expects to spend $50
million this year on its Wuhan, China, facility.

Better call the waaahmulance… waah waah…

Evergreen Solar's Massachusetts plant is producing panels at $2.05 per
watt, down from $2.24 per watt in the third quarter of 2009. But the
100-megawatt Chinese facility will produce panels for $1.25 per watt,
going down to $1.00 per watt by the end of 2012.

Yes a tough challenge. But look at what they've already done.

The company expects to produce 20 to 25 megawatts of solar cells per
quarter in China by early 2011. During that time, the company expects
to reduce costs at its Devens [Massachusetts USA] facility to about $1.50 per watt "as we
transition panel assembly to China," said Feldt.

Not too shabby, although still quite a ways to go. But what do these guys decide to do?

In response to the Chinese competitive challenge, Evergreen Solar has
two options. It can try to counter China's advantage by reducing its
costs in Massachusetts as low as possible, or "get to China as fast as
we can," said El-Hillow. "We've tossed internally about becoming more
aggressive in Washington, trying to get them to understand the
situation that we face as a solar manufacturer and leveraging our wafer
technology. There's no silver bullet here. It's an incredibly tough
situation." Added CEO Feldt: "The issue for us is just how long does it
take to get [to China]."

Waaah…. unbelievable. The magical government solution. Of course they've tasted the milk already.

In 2007, the company received $23 million in grants from the State of
Massachusetts to build its facility on state-owned property in Devens.
It also received $17.5 million in low-interest loans along with a
30-year lease on the property.

And then they found a new use for those taxpayer funds.

Evergreen spent $8.5 million in its fourth quarter on the transition of panel assembly operations from Devens, Mass., to China.

I wonder if those taxpayers realize what their investment is doing.

I also wonder where they'd be if they put half as much time working on
internal improvements instead of whining and lobbying our
representatives. And they should wonder why their high tech operation
isn't as efficient as the likes of American Apparel, who beats the
socks off (literally) of overseas sweatshops while paying 4,000+ people above
minimum wage plus health benefits in the low cost nation of Los
Angeles. One of my favorite examples of a company that simply focuses internally, which happens to have just been called a small cap long-term winner by Motley Fool.

Comments

Check out Evergreen’s website. On several pages they mention how they have purposely set themselves up as a vertically integrated manufacturer to reduce environmental impact and guarantee quality. I guess they’ll need to update their site.

According to the news article cited, the company sells 68% of its output in Europe. You think it would make sense to locate some production there, instead of China.